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The “Cash Only” Nonprofit Raising more money for your organization while promoting savvy financial management for donors. By ADAM MILLER, CFP® Adam is a CERTIFIED FINANCIAL PLANNER™ professional. As a trusted fiduciary and fee-only financial planner, he works passionately to help families preserve and manage their assets. By encouraging families to communicate their values, he helps them to make an impact, sharing their wealth and wisdom with the people and organizations they care about. Discover more about finance and philanthropy at www.elderadofinancial.com

There is this great little bakery that my family loves. I couldn’t even tell you what it’s called because we refer to it as “The Cash Only Bakery.” I was quite embarrassed when I offered to take good friends to that bakery…my treat! We ordered our food and I pulled out my debit card. The woman behind the counter seemed a bit weary saying it again as she tapped on the sign taped to the counter that said “CASH ONLY.” I don’t frequently carry cash and my friends were kind enough to cover the bill. According to the most recent data from the U.S. Census Bureau, the average American family has about 11% of their total assets in cash (this includes CDs, money markets, savings, cash and checking). Everything else is in the form of noncash assets…our stuff. Investments in publicly traded stock are a big item and investments by business owners in their own companies are at the top of the chart as well. Real Estate is way up on the list too. When you really look at it, Americans have way more “stuff” than they have cash. Americans are charitable and many support nonprofits and community benefit organizations they care about. But there is a problem; when these organizations ask for money, most expect a check. According to the IRS, only about 25% of charitable giving includes gifts of assets while the vast majority are gifts of cash. Your donors are giving and being asked to give cash, a small portion of our assets, while more abundant resources are being neglected. The benefits of non-cash giving. For folks to write a check to a nonprofit, they have to have

cash in the bank. The wealth of many families in your community may be tied up in other assets. Even wealthy donors may have cash flow issues and struggle with liquidity. Much of the real estate, family businesses, investments and other assets that a family owns were purchased for a cost that is much lower than today’s value. In order to turn these assets into more cash, they must be sold and taxes must be paid. These donors do not like the word ‘taxes.’ Your donors only have so much cash to give and when you ask them to write a check, they have to decide what piece of the pie they are willing to give to your organization. There is an obvious problem with how we are raising money. Helping your donors to give more. Your nonprofit can take advantage of this obvious imbalance. If these donors give appreciated assets they don’t have to pay the tax. Because you are a tax exempt entity, you don’t either. They get to keep more of their cash and are able to give a bigger gift. Once donors learn to give non-cash gifts, they prefer to continue giving more generously through these gifts. Here are a few of the many examples: - Small business and big giving. Some of the folks who support nonprofit work the most in the U.S. are small business owners. Many are still giving cash or writing checks but the vast majority of their net worth is wrapped up in their company. A planned giving expert can help these business owners to reduce taxes and improve cash flow by making gifts of their company stock. It is a bit more difficult to gift a nonpublicly traded company, but with the right expertise and the right circumstances, small business owners can give a very meaningful gift


to your organization. A donor may give a lump sum or create a fund that allows them to support charitable organizations like yours long term. Now the cash that they were devoting to giving can help their cash flow while assets that were locked up in their business can be used to support your work. It is a win-win situation.

Donors don’t have to split up the cash pie anymore. You have created a way for them to pay less in taxes and to make a greater impact. You have helped them to meet their current needs. You have helped your donors in their financial management and at the same time, improved the bottom line for your nonprofit.

- The Tax Procrastinator. The government makes it easy in some accounts to defer taxes, and many wealthy individuals have taken advantage of tax deferral. These assets can feel ‘trapped’ in accounts due to the pending taxes. Billions of dollars are in retirement plans like IRAs and 401ks. When these assets are distributed, the taxman takes his cut. Many retirees procrastinate paying the ordinary income tax and refrain from using these assets, but at age 70½ the government requires a distribution. Your organization can teach these donors about the Charitable IRA Rollover which allows them to transfer a gift directly from their IRA to your organization and NEVER pay taxes on that money.

No need to change your job description. Some of these assets are easy for a nonprofit to accept while others are much more complex. Don’t be concerned if this is overwhelming. Your plate is already full and adding the phrase “financial expert” or “philanthropic planner” to your job description would be impossible. However, there are folks out there who have these skills and care about your charitable mission. Empower these professionals to help you fundraise more effectively. Take down that “CASH ONLY” sign and watch the difference this dynamic fundraising can make.

Similar gifts of highly appreciated real estate or stocks allow donors to drastically reduce taxes. From a business sale to a classic car, real estate to a piece of art--any gift of appreciated property can help a donor and your bottom line simultaneously. - Charitable planning aligns donors’ needs with your worthy cause. Many Americans would be wise in their financial management to give effectively and avoid taxes, but sometimes these options don’t meet all of their needs. Perhaps someone owns these assets but needs income for life. A charitable gift annuity or charitable remainder trust could create income for the future and a current tax benefit while setting your organization up to receive a substantial gift down the road. On the other hand, some donors don’t need any more income today. Oil and gas royalties, rental income from real estate and dividend paying stocks can add to a family’s income when they don’t need it, forcing them to pay higher taxes. Through planning, they can shift a stream of income to your nonprofit for a term of years until their needs change.

We can help your nonprofit to come up with a plan to get started. Our mission is to help clients to be better stewards and to realize their full charitable potential. From our unique perspective we can work with you to create a plan to speak with donors on these topics and walk along side you to see those conversations through to meaningful gifts that will benefit families and your nonprofit.


The Cash Only Nonprofit